Nursing home arbitration agreements remain the subject of scrutiny here in Pennsylvania and beyond. A recent challenge to a Kentucky arbitration agreement recently made its way to the Supreme Court of the United States (Kindred Nursing Centers, L.P. v. Clark).
The underlying case involves two families, two different power of attorney agreements, and two identical nursing home arbitration agreements. Beverly Wellner was the wife of Joe Wellner. Beverly was also Joe’s power of attorney. Under the terms of the Wellner power of attorney, Joe gave Beverly the authority, “in my name, place and stead,” to, among other things, “institute legal proceedings” and make “contracts of every nature in relation to both real and personal property.” Janis Clark was the daughter of Olive Clark. Under the terms of the Clark power of attorney, Olive gave Janice “full power…to transact, handle, and dispose of all matters affecting me and/or my estate in any possible way,” as well as the authority to “draw, make, and sign in my name any and all…contracts, deeds, or agreements.” The Clark power of attorney was notably broader than the Wellner power of attorney. Joe and Olive became residents of Kindred Nursing Centers, L.P. in 2008. In their capacity as power of attorney for their respective loved ones, Beverly and Janice signed contracts with identical arbitration provisions that required “[a]ny and all claims or controversies arising out of or in any way relating to…the Resident’s stay at the Facility” be resolved through “binding arbitration.”
In 2009, Joe and Olive died while residents at Kindred. Both of their estates, represented by Beverly and Janice, sued Kindred for substandard care resulting in their deaths. Kindred sought dismissal of the lawsuits based on the arbitration agreements signed a year prior. The Kentucky trial court denied Kindred’s motion and the Kentucky Court of Appeals agreed that the cases could proceed.
The Kentucky Supreme Court affirmed the decisions of both the trial court and Kentucky Court of Appeals that the arbitration agreement was invalid under Kentucky’s clear statement rule. By way of background, the Kentucky Constitution protects the “sacred” and “inviolate” right to access to the courts and trial by jury. Based on this understanding, the fundamental nature of these rights, the Kentucky Supreme Court determined an agent may only deprive a principal of this right to access to the court or a trial jury if and only if the power of attorney “expressly so provide[s].” The Kentucky Supreme Court acknowledged that the Clark power of attorney was much broader than the Wellner power of attorney in scope and may have given Janice the power to enter into the arbitration agreement with Kindred. Despite this language and based on Kentucky’s clear statement rule, the Kentucky Supreme Court held that both arbitration agreements were invalid. Beverly and Olive could only enter into an arbitration agreement on behalf of their loved one if the power of attorney specifically gave them the power to enter into arbitration agreements.
In a 7-1 ruling, the Supreme Court held that the Kentucky Supreme Court’s application of the clear statement rule violates the Federal Arbitration Act (FAA) by disfavoring arbitration agreements. The FAA provides that arbitration agreements are “valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” 9 U.S.C. §2. Arbitration agreements may only be invalidated on principles applicable to other contracts. Put simply, arbitration agreements should be placed on an equal footing with other types of contracts and cannot be disfavored by the law. The Kentucky Supreme Court’s interpretation of the clear statement rule requiring an explicit statement of the principal’s intent to give the agent authority to relinquish the right to go to court and receive a jury trial does not place arbitration agreements on equal footing. It disfavors arbitration agreements.
The Supreme Court held that the Clark arbitration agreement, which was signed under a broad power of attorney, had to be enforced by the trial court and reversed the Kentucky Supreme Court’s ruling with respect to that agreement. To the Supreme Court’s reading of the record, it was unclear whether the Wellner arbitration agreement was invalidated strictly on the basis of the clear statement rule or whether it was invalidated on the based on the language of the power of attorney, the matter was vacated for further consideration at the trial court level. This Supreme Court decision emphasizes the need to carefully consider not only the language of the arbitration agreement but also the language of the underlying power of attorney agreement.
Consult experienced healthcare counsel to ensure your arbitration agreements complies with applicable law. The attorneys at Fitzpatrick Lentz & Bubba have experience advising personal care homes, assisted living facilities, and healthcare providers on a wide range of matters including arbitration agreements.
